The Dynamics Of Stock Market Development In Kenya

Abstract

This paper highlights the origin of the stock market in Kenya, and traces the reforms that have been undertaken to develop the stock market. It also highlights the growth of the Kenyan stock market, as well as the challenges currently facing the market. The country has one stock market, known as the Nairobi Securities Exchange (formerly the Nairobi Stock Exchange). It is one of Africas largest stock markets. Since the early 1980s, a number of stock market reforms have been implemented in Kenya. These include the formation of a regulatory body (Capital Markets Authority CMA) in 1989, the replacement of the "Call-Over" trading system by the floor-based "Open-Outcry System" in 1991, the reduction of listing costs, the relaxation of the exchange control for locally controlled companies, and the repeal of the Exchange Control Act. Following these reforms, Kenyas stock market has developed significantly in terms of market capitalisation, the total value of stocks traded, and the turnover ratio. Although the stock market in Kenya has developed over the years, like many other developing countries' markets, it still faces a number of wide-ranging challenges.